But after several changes of heart with the main players I think the debate can finally be laid to rest. Undisputedly a great improvement, the automatic downloading of bank transactions received flak from several quarters mainly due to questions over a third-party supplier, Yodlee. Yodlee provides bank feeds to Xero (allegedly a small percentage), Saasu and the upcoming Reckon One.

In an ideal world , a bank feed would be an exact copy of your paper bank statement. In this situation the feed could be relied upon as a statement of record. Xero at one stage were happy to tell bookkeepers, accountants and their clients that bank feeds didn’t need checking. But the truth is that often a bank feed is not a feed from a bank. And even when it is, the feed can still contain mistakes.Now a sign that the pragmatists in Xero have won over from the idealists. Last month the company emailed partners about a change to the reconciliation screen.

“When all the statement lines are reconciled, a message will now appear explaining that the statement balance in Xero may not match the bank account balance, and that it’s a good idea to cross-check the two to make sure they match up. We’re adding this message to remind your clients that the statement balance in Xero isn’t a live account balance from your bank but is calculated using your opening bank balance (conversion balance) plus daily imported statement lines. Occasionally, things like duplicated or omitted statement lines can throw this balance out,” Xero wrote in the message.

Xero users were notified of a minor three-line update, the third line of which read:

Added a reminder to double-check your balance and transactions in the bank reconciliation report.

Business users often complain that big software companies don’t listen. In this case they have no complaints. MYOB used its acquisition of BankLink to promote the superior accuracy of its bank feeds over the Yodlee-powered competition. But while MYOB can claim many fewer errors, they can’t say they have eliminated them.

I contacted several bookkeepers and accountants before writing this post to gauge how often they found errors in feeds. One bookkeeper with six clients said she still came across an error every other day, but two accountants with hundreds of clients said they only saw a couple of instances a year across the board. The reason for the discrepancy could be that smaller banks are less reliable at providing feeds or the varying experience of the bookkeeper or accountant.

If you are actually entering all the invoices it’s easy to see if something is missing. I think the issue is majorly over-played. If people were using the software properly there would not be too many issues,” said one senior accredited accountant.

The second change of heart came from the ICB, which in the past has played a conservative line on sharing bank details with Yodlee. The bookkeeping institute gave Xero the highest score for bank feeds in an independent review of desktop and cloud accounting software programs from MYOB, Reckon, Intuit and Saasu. The ICB drew its conclusions from a team of four reviewers and a panel of seven senior consultants accredited with the major vendors.

“Our information is that the accuracy of bank feeds is not a significant problem,” Addison said.

Xero and Saasu also scored highest in their ability to verify bank feeds. (Interestingly, MYOB’s cloud program LiveAccounts also scored an 8 out of 10 but the AccountRight 2012 and Live programs scored a zero. MYOB would argue that BankLink’s high reliability makes such checks unnecessary but the ICB disagrees.) Given that, prior to bank feeds, bookkeepers were responsible for data entry of bank transactions, their opinion is worth listening to.

One day the bank feed will be a statement of record and a warning won’t be required. But we’re not there yet. Now at least business users can enjoy the great productivity benefits of bank feeds and know they need to keep an eye open for the odd error.

I feel that many online security concerns, like this concern with accuracy, are somewhat misinformed.

It is important to compare different feeds to see which is the most accurate, but this article does not relate accuracy to the relative cost or the extent of coverage. I am sure that this is what is already drives major feed consumers, including Xero and Intuit. Xero surely knows that direct bank feeds are more accurate than Yodlee screen scaping, which is probably why it keeps announcing new direct feeds. On the other hand, with the exception of PayPal, I only recall one feed error in my year as a Xero Silver Partner, with many clients. Even PayPal has been clean for quite some time.

There are certainly dangers with anything. However, we should always focus on whether choices make us safer and more productive, rather than whether a choice is perfectly free of danger. In this case I feel that changing the Xero cloud solution is so inxedibly better that the time to bury this debate passed long ago. We have some of the best security-trained brains available, in and out of Xero, Intuit, Yodlee, banks, businesses and government. All of them are constantly trying very hard to improve security.

Xero, for example, even has teams of hackers that keep trying to break into their systems. They never succeed because Xero does a terrific job in using highly trained security and data processing professionals, while running many multiple redundant computers, at multiple highly secure and dispersed sites, with multi-level continuous backups, to minimize our security risks. They have had this type of approach for a very long time, which is one big reason I chose Xero initially . I now have more than a year confirming that they are always outstandingly reliabiable at keeping accurate accounting records always updated, at what I feel are ridiculously low prices.

Intuit and QuickBooks Online showed us very contrary results as to reliability. Intuit let more than a five million users depend on one data center. It then had a series of long outages, including one lasting up to five days for some users. No one should ever trust the reliability of the virtually unchanged management team that let this happen.

What we actually should focus on is the relative danger of alternatives. Local computer desktops are, by far, the most incredibly unsafe places for data. They rarely use high-quality redundant components, in highly secure locations, run by data processing or security professionals. They are constantly subject to untested combinations of components, programs, spyware, viruses and other accidental and deliberate attacks. Component failure, fire, theft, crime, viruses, malware, utility failures and weather are only part of the many things that can disrupt them. We also often use local computers with mailed bank and credit card information. This former (college) postman can tell you that the U.S. mail is one of the least secure possible ways to deliver anything (and one of the best possible ways to become an identity theft victim).

QuickBooks wastes our time by making us frequently change long complex passwords. However, Intuit also provides programs to remove passwords when we forget them, so what use are passwords?

If Intuit really wanted security, it should have long ago made the Quickbooks desktop program backup online automatically. Related transfers can be done each time users close QuickBooks, as we do for all clients. They should not even require user action or screen time. However, everything I said above is well known by Intuit management. If they really want security, they need to discontinue their QuickBooks desktop software completely, as nothing can make local small office or home compluters anywhere near as secure as a proprly managed cloud.

800,000 users dropped QuickBooks desktop software already, but four million have not yet gotten the security and reliability message. They do not realize that they are significantly endangering their web access by frequent upgrades to increasingly more compex computers and programs, as particularly evidenced by recent computer bugs. Fortunately and increasingly, many of these departing QuickBooks desktop users did not switch to QuickBooks Online, which is less reliable, less automated, less complete and less open to add-ons.

The article is especially wrong to discuss how many errors accountants and bookeepers find in bank feeds. We should all incessantly seek are better alternatives. That is why this issue should be how many errors do accountants and bookkeepers make, when entering bank and credit card transactions manually, as opposed to how many errors do they find in bank feeds? In both cases, this should be before and after they reconcile with financial institutions. Throughout my long CPA career I always saw bookkeepers, business owners and accountants (including me) make MANY times the errors that we now see in bank feeds. That is precicely why bank reconciliations were a necessity starting long before I was born.

Xero feeds are already so accurate that I question whether it pays to even check balances more than occasionally. The article discussion of error rates (about one per thousand) only strengthed my belief. this. We get read only logins for most client bank accounts. This is primarily to look up check payees, so we can enter and classify them, but we occasionally check balances. However, there is no reason not to require every bank to provide direct bank feeds to account holders and our web providers. They already provide them to government regulators. There is also is no reason all such feeds not include before and after account balances for absolute accuracy. I am sure that feeds already use checksums or other computer encoding for automatic error correction and retransmission, but including before and after balances would make this rock solid.

There is one other thing that I always saw, but did not appreciate before Xero. It was the consistent terrible delays in making manual accounting entries. Even when companies used oonline bank access or bank feeds, QuickBooks Online kept requiring them to upload one account at a time for many years. In 2005, I told top Intuit managers they should have automatic nighly updates on all accounts. The agreed it was a terrific idea, but never did this. This is a perfect example of why only Xero users manage based on current reports.